"Frivolous" Lawsuits News | Insurance Reform News

America's Health Insurance Plans (AHIP) Ad Campaign is Madison Avenue Malpractice

Ad Contradicted by Congressional Budget Office, Business Week

Last month, an insurance industry group called America's Health Insurance Plans (AHIP) launched its own advertising campaign accusing the victims of medical negligence and lawyers of driving up health care costs, claiming, "The medical liability system costs each American household up to $1,200 a year."¹

AHIP even made the ludicrous claim that medical malpractice claims cost two times more than the federal government spends on education and four times more than homeland security.

According to the non-partisan Congressional Budget Office however, malpractice costs amounted to "less than 2 percent of overall health care spending. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small."²

While insurance rates for doctors and patients continue to climb, the New York Times has reported³ that malpractice claims dropped 8.9% last year, to less than $6 billion. That comes out to about $20 per person, less than Americans spend on dog and cat food each year, and strikingly small considering 100,000 Americans die every year because of preventable medical errors. An American Bar Association task force says that only 2% of victims of medical malpractice even file claims.

How could AHIP get it so wrong? The Tillinghast-Towers Perrin "study" they cite to justify their bogus number has been widely discredited. Business Week editorialized that the study "includes everything from payouts for fender-benders to the salaries of insurance industry CEOs. It's a wild exaggeration."⁴

Ouch. Coming from Business Week, that has to hurt. All the criticism forced Tillinghast to admit in a later edition that "the costs tabulated in this study are not a reflection of litigated claims or of the legal system."⁵

Why would AHIP launch such a campaign now? Perhaps the insurance industry is hoping to distract from the Securities and Exchange Commission investigation into potentially-widespread improprieties in the industry. New York State Attorney General Eliot Spitzer has told federal lawmakers that Congress needs to look into the insurance industry's "Pandora's box" of problems⁶– one of which might be its anti-trust exemption.

Notes

1. http://www.ahip.org/content/default.aspx?docid=8931
2. "Limiting Tort Liability for Medical Malpractice" CBO 1/08/04
3. "Behind Those Medical Malpractice Rates" New York Times 2/22/05
4. Business Week Editorial, March 14, 2005
5. U.S. Tort Costs: 2004 Update, at 4
6. "SEC Brings New Federal Oversight to Insurance Industry With Probes" Wall Street Journal 4/1/05

Updated April 5, 2005